Kiwi dairy major Fonterra to set up Delhi office in third bid to enter India

New Zealand-based dairy giant Fonterra, former partner of Bangalore-headquartered Britannia, has announced it is setting up a local office in a bid to step up its presence in India. The new office, in Delhi, would be led by expatriate Hamish Gowans, who would be designated general manager.

The move to have a local presence comes at a time when the Auckland-headquartered group, formed in 2001, is fine-tuning its strategy for India following two aborted attempts to get a foothold in the country. Following the split with Britannia in 2009, when the latter acquired Fonterra's 49-per cent stake in the seven-year-old joint venture, Britannia New Zealand Foods, the Kiwi giant had attempted to tap the local market by entering into an agreement with the Indian Farmers Fertiliser Cooperative Ltd (Iffco) to set up a large dairy farm at the latter's Nellore Kisan special economic zone (SEZ).

This was in 2010. But the Rs 1,000-crore project, which envisaged having 40,000 high-yield cows that produced high-quality milk, did not take off following the board of approvals for SEZs rejecting Iffco's proposal.

Now, with the independent office, Fonterra, which has revenues in excess of $17 billion, is expected to go solo in the country. Kelvin Wickham, Fonterra's president - Greater China and India, said the opening of the new office would help the company get a better understanding of the local dairy market.

"India’s dairy industry is growing rapidly. With 20 million more mouths to feed every year and an increasingly affluent population, the demand for high-quality dairy nutrition continues to grow at a rapid pace; annual dairy consumption is forecast to reach around 180-200 million tonnes by the end of the decade," Wickham said. "Today, India produces around a sixth of the world’s milk and almost all of this is consumed locally. The country has a large, complex dairy industry and, while Fonterra has developed a strong knowledge of the country’s dairy environment, it is clear we need to have dedicated leadership on the ground to further strengthen relationships and develop opportunities," he added.

Globally, Fonterra has three core brands — Anchor, Anlene and Anmum — producing powdered milk, ready-to-consume milk, yoghurt, cheese, butter and other dairy products that are exported to markets in the Middle East, Australia, Africa and Asia. According to industry estimates, Fonterra is responsible for over 25 per cent of the world's dairy exports.

In New Zealand alone, Fonterra is the largest cooperative group with over 10,000 farmers owning it. The group was formed following the merger of the two largest cooperatives in New Zealand — the New Zealand Dairy Group and Kiwi Co-operative Dairies — with the New Zealand Dairy Board.

Gowans, who takes over as the India head, has an understanding of emerging markets, says Wickham, having managed exports of Fonterra's products to countries in Asia. He is expected to help the dairy major galvanise its operations India as its seeks avenues to establish itself and grow.

But with well-entrenched local players such as Amul and Mother Dairy as well as private players such as Britannia, Nestle and Danone, the road ahead, say experts, is not likely to be easy.

Besides national level-players, the dairy markets in India has a number of regional brands that massively undercut to drive penetration. Thanks to all this most private players have opted to operate in the value-added or premium dairy market in India.